B-164390, OCT. 22, 1968

B-164390, OCT. 22, 1968

TO MR. SECRETARY:

BY LETTER DATED JULY 22, 1968, WITH ENCLOSURES, THE ASSOCIATE ADMINISTRATOR FOR DEVELOPMENT, FEDERAL AVIATION ADMINISTRATION, FURNISHED A REPORT ON THE PROTEST OF THE DAVEY COMPRESSOR COMPANY THAT NO AWARD BE MADE UNDER INVITATION FOR BIDS NO. WA5M-8-0406B1. THE COMPANY HAS CONTENDED THAT SINCE ONLY ONE RESPONSIVE BID WAS RECEIVED, THE INVITATION SHOULD HAVE BEEN CANCELLED AND THE PROCUREMENT READVERTISED.

THE INVITATION REQUESTED BIDS, FROM SMALL BUSINESS CONCERNS ONLY, FOR A DIESEL ENGINE DRIVER AIR COMPRESSOR. TWO BIDS WERE RECEIVED ON MAY 8, 1968, FROM THE FREE STATE EQUIPMENT COMPANY AND SCHRAM, INCORPORATED. THE DAVEY COMPANY SUBMITTED AN UNACCEPTABLE LATE BID WHICH WAS REJECTED UNDER FEDERAL PROCUREMENT REGULATIONS (FPR) 1-2.303 1. THEREAFTER, THE CONTRACT WAS AWARDED TO FREE STATE AS THE LOWEST, AND PRESUMABLY, RESPONSIVE BIDDER UNDER THE INVITATION. UPON REVIEW OF THIS PROCUREMENT, WE HAVE CONCLUDED THAT THE AWARD WAS IN ERROR. WHILE WE ARE UNABLE TO DIRECT THAT CORRECTIVE ACTION BE TAKEN BECAUSE THE CONTRACT HAS BEEN COMPLETELY PERFORMED, OUR CONSIDERATION OF THE PROTEST IS SET OUT BELOW FOR FUTURE GUIDANCE OF PROCUREMENT OFFICIALS.

SINCE THE PROCUREMENT WAS WHOLLY SET ASIDE FOR SMALL BUSINESS, THE REPRESENTATIONS AND CERTIFICATIONS REQUIRED TO BE MADE BY BIDDERS WERE OF SPECIAL SIGNIFICANCE. PAGE 2 OF THE INVITATION (STANDARD FORM 33) ENTITLED "REPRESENTATIONS, CERTIFICATIONS, AND ACKNOWLEDGMENTS," PROVIDED IN PART: "THE OFFEROR REPRESENTS AND CERTIFIES AS PART OF HIS OFFER THAT: (CHECK OR COMPLETE ALL APPLICABLE BOXES OR BLOCKS.) "1. SMALL BUSINESS (SEE PAR. 14 ON SF 33A)

HE ( ( IS, ( ( IS NOT, A SMALL BUSINESS CONCERN. IF OFFEROR IS A SMALL BUSINESS CONCERN AND IS NOT THE MANUFACTURER OF THE SUPPLIES OFFERED, HE ALSO REPRESENTS THAT ALL SUPPLIES TO BE FURNISHED HEREUNDER ( ( WILL, ( ( WILL NOT, BE MANUFACTURED OR PRODUCED BY A SMALL BUSINESS CONCERN * * *.'

FREE STATE REPRESENTED AND CERTIFIED THAT "HE IS A SMALL BUSINESS CONCERN" AND ALSO REPRESENTED AND CERTIFIED THAT ALL SUPPLIES TO BE FURNISHED HEREUNDER WILL NOT BE MANUFACTURED OR PRODUCED BY A SMALL BUSINESS CONCERN BECAUSE HE "IS NOT THE MANUFACTURER OF THE SUPPLIES OFFERED.'

PARAGRAPH 14 OF STANDARD FORM 33A DEFINED A "SMALL BUSINESS CONCERN" AS ONE WHICH CAN ALSO QUALIFY UNDER THE SMALL BUSINESS REGULATIONS AT 13 CFR 121. FPR 1-1.706-5 (C) SIMILARLY DEFINES SUCH A CONCERN. 13 CFR 121.3-8 (C), DEFINING A NONMANUFACTURING SMALL BUSINESS CONCERN, PROVIDES THAT ANY CONCERN WHICH SUBMITS A BID WHICH PROPOSES TO FURNISH A PRODUCT NOT MANUFACTURED BY IT IS DEEMED TO BE A SMALL BUSINESS CONCERN WHEN:

"/2) IN THE CASE OF GOVERNMENT PROCUREMENT RESERVED FOR OR INVOLVING THE PREFERENTIAL TREATMENT OF SMALL BUSINESSES, SUCH NONMANUFACTURER SHALL FURNISH IN THE PERFORMANCE OF THE CONTRACT THE PRODUCTS OF A SMALL BUSINESS MANUFACTURER OR PRODUCER WHICH PRODUCTS ARE MANUFACTURED OR PRODUCED IN THE UNITED STATES; "

ALTHOUGH FREE STATE CERTIFIED AND REPRESENTED ITSELF AS A SMALL BUSINESS NONMANUFACTURING BIDDER WHICH WOULD NOT FURNISH A PRODUCT MANUFACTURED BY A SMALL BUSINESS CONCERN, AWARD WAS MADE TO IT ON MAY 21, 1968. THIS ACTION WAS JUSTIFIED IN THE JULY 22 REPORT AS FOLLOWS:

"IN ACCORDANCE WITH SBA AND THE FPR-S, OUR CONTRACTING PERSONNEL RELIED UPON THE COMPANY'S SMALL BUSINESS CERTIFICATION. ALSO, IN ACCORDANCE WITH PAST PRACTICES, WE ACCEPTED THE COMPANY'S SMALL BUSINESS STATUS SINCE THEY WERE REQUIRED TO MODIFY THE WORTHINGTON EQUIPMENT IN ORDER TO MEET OUR SPECIFICATIONS. SINCE MR. JOHNSON'S PROTEST (ON BEHALF OF DAVEY COMPRESSOR) WAS NOT RECEIVED UNTIL AFTER AWARD WAS MADE, WE ARE PRECLUDED BY THE FPR'S (1-1.703-2 (B) ( FROM TAKING ANY ACTION ON IT. SINCE FREE STATE EQUIPMENT COMPANY WAS THE LOW RESPONSIVE BIDDER AND A TECHNICAL EVALUATION DETERMINED THE EQUIPMENT IT OFFERED TO BE ACCEPTABLE, IT WAS AWARDED CONTRACT FA68WA 1935 ON MAY 21, 1968.'

WE ARE FURTHER ADVISED THAT SINCE FREE STATE APPARENTLY PERFORMED SOME MODIFICATION WORK ON THE COMPRESSOR MANUFACTURED BY THE WORTHINGTON COMPANY -- A LARGE BUSINESS CONCERN -- IT WAS A SMALL BUSINESS MANUFACTURER FOR THE PURPOSES OF THE PROCUREMENT. HOWEVER, THIS POSITION OVERLOOKS THE PLAIN FACT THAT FREE STATE, BY ITS BID CERTIFICATIONS AND REPRESENTATIONS, HELD ITSELF OUT AS A NONMANUFACTURER OF EQUIPMENT TO BE FURNISHED BY A LARGE BUSINESS CONCERN. UNDER FPR 1-1.706-5 (B), BIDS RECEIVED FROM FIRMS "WHICH DO NOT QUALIFY AS SMALL BUSINESS CONCERNS SHALL BE CONSIDERED NONRESPONSIVE AND SHALL BE REJECTED.'

IT IS CLEAR THAT ONE OF THE ESSENTIAL CRITERIA OF RESPONSIVENESS UNDER A TOTAL SMALL BUSINESS SET-ASIDE INVITATION IS THE BIDDER'S AGREEMENT TO FURNISH A PRODUCT MANUFACTURED BY A SMALL BUSINESS CONCERN IF THE BIDDER ITSELF IS A NONMANUFACTURER OF THE PRODUCT. IN B-152294 DATED AUGUST 27, 1963, WE MADE THE FOLLOWING OBSERVATIONS WHICH HAVE RELEVANCY HERE:

"THE SECOND LOW BIDDER DELIBERATELY NEGLECTED TO FURNISH THE SOURCE OF THE PRODUCT IT WAS UNDERTAKING TO SUPPLY IN THIS CASE EVEN THOUGH THE BID FORM SPECIFICALLY REQUIRED THIS INFORMATION. NO OTHER INFERENCE CAN BE DRAWN FROM THE BIDDER'S FAILURE TO CHECK THE APPROPRIATE BOX WHICH WOULD BE CONSISTENT WITH THE INSERTION OF THE WORDS -WILL ADVISE- IN PARAGRAPH ELEVEN. SINCE THE PROCUREMENT WAS A TOTAL SMALL BUSINESS SET-ASIDE, BIDDERS WERE ON NOTICE THAT THE CHARACTER OF THE ULTIMATE SUPPLIER WAS OF THE ESSENCE OF THE INVITATION. TO ALLOW A BIDDER, EVEN THOUGH IT BE A DOMESTIC SMALL BUSINESS, TO POSTPONE REVELATION OF ITS SOURCE OF SUPPLY UNTIL AFTER BIDS ARE PUBLICLY OPENED AND PRICES DISCLOSED IS UNFAIR TO OTHER BIDDERS WHO SUBMITTED BIDS UPON THE BASIS OF A NAMED SOURCE OF MANUFACTURE. 39 COMP. GEN. 532. HAD G. AND C. NAMED A LARGE BUSINESS SUPPLIER AFTER BID OPENING, ITS BID WOULD HAVE HAD TO HAVE BEEN REJECTED.'

WE UNDERSTAND THAT THE CONTRACTING OFFICER RELIED UPON OUR DECISIONSB- 162440, NOVEMBER 14, 1967, AND B-148260, MAY 8, 1960, CITED THEREIN. THE 1967 DECISION, THE LOW BIDDER CERTIFIED THAT HE WAS A SMALL BUSINESS MANUFACTURER OF THE END ITEM OFFERED. HOWEVER, IT WAS CONTENDED THAT SUCH BIDDER WAS INELIGIBLE FOR AWARD BECAUSE A LARGE BUSINESS CONCERN WAS, IN FACT, THE MANUFACTURER AND BECAUSE THE LOW BIDDER WOULD PERFORM ONLY A MINOR PORTION OF THE WORK. WE DID NOT OBJECT TO THE AWARD MADE TO THE LOW BIDDER AND HELD:

"WHETHER A FIRM QUALIFIES AS A MANUFACTURER IS A QUESTION FOR DETERMINATION IN THE FIRST INSTANCE BY THE CONTRACTING OFFICER. IN OUR DECISION B-148260, MAY 8, 1962, COPY ENCLOSED, AN ANALOGOUS SITUATION WAS PRESENTED FOR OUR CONSIDERATION. IN THAT CASE A SMALL BUSINESS CONCERN PROPOSED TO PROVIDE THE GOVERNMENT WITH 1,000,000 METAL FALLOUT SHELTER SIGNS AND FOUR VARIETIES OF PRINTED OVERLAYS FOR THE SIGNS. THE SMALL BUSINESS BIDDER INTENDED TO SUBCONTRACT THE ENTIRE PROCUREMENT TO A LARGE BUSINESS EXCEPT FOR THE PRINTING OPERATION AND THE PACKAGING PROCESS. EVEN THOUGH IT WAS ESTABLISHED THAT THE LARGE BUSINESS SUBCONTRACTOR COULD MANUFACTURE THE COMPLETE SIGN WE UPHELD THE ADMINISTRATIVE FINDING THAT THE SMALL BUSINESS CONCERN QUALIFIED AS A MANUFACTURER OF THE END ITEM, WITHIN THE MEANING OF A DEFINITION SUBSTANTIALLY IDENTICAL TO THE ONE QUOTED ABOVE. WE HAVE ALSO HELD THAT A FIRM WHICH PERFORMS WORK ON AND ADDS MATERIAL TO A PRODUCT WHICH IS SMALL IN COMPARISON TO THE VALUE OF THE FINISHED PRODUCT MAY QUALIFY, NEVERTHELESS, AS A MANUFACTURER OF THE END ITEM, FOR PURPOSES OF THE BUY AMERICAN ACT AND IMPLEMENTING REGULATIONS. 39 COMP. GEN. 435.

"IN THE LIGHT OF THE FACTS OF RECORD, INCLUDING THE FACT THAT THE ELECTRIC DRIVER, WHICH YOU APPARENTLY CONSIDER TO BE THE MAJOR ITEM OF THE KITS, APPEARS FROM YOUR CATALOG TO REPRESENT NO MORE THAN 25 PERCENT OF THE PRICE WHICH YOU SUGGEST COULD BE QUOTED BY YOU FOR THE KIT, WE MUST CONCLUDE THAT A SUBSTANTIAL BASIS EXISTS TO SUPPORT THE ADMINISTRATIVE CONCLUSION THAT WRIGHT IS THE MANUFACTURER OF THE END ITEM. HOWEVER, OUR DECISION IN THIS CASE SHOULD NOT BE INTERPRETED AS UNQUALIFIEDLY DISPOSITIVE OF THE PROPRIETY OF ACTIONS WHICH YOU SUGGEST YOU MAY TAKE IN CONNECTION WITH FUTURE PROCUREMENTS, SINCE THE DETERMINATION OF WHAT WILL CONSTITUTE -MANUFACTURE- IN ANY PARTICULAR CASE MUST BE EVALUATED ON THE SPECIFIC FACTS THERE INVOLVED.'

IT IS IMPORTANT TO NOTE THAT UNLIKE THE LOW BIDDER IN B-162440, FREE STATE REPRESENTED ITSELF AS A NONMANUFACTURER. HENCE, NO QUESTION EXISTED AS TO WHETHER FREE STATE QUALIFIED AS A MANUFACTURER. WE RECOGNIZE THAT UNDER FPR 1.703-1 (A), A CONTRACTING OFFICER MUST ACCEPT AS CONCLUSIVE A REPRESENTATION BY A BIDDER THAT IT IS A SMALL BUSINESS CONCERN AS DEFINED BY SBA. BUT HERE, THE CONTRACTING OFFICER WAS FULLY APPRISED IN THE FREE STATE BID THAT SUCH BIDDER WAS NOT AN ELIGIBLE SMALL BUSINESS CONCERN AS DEFINED BY SBA. SINCE FREE STATE WAS AN INELIGIBLE BIDDER BY REASON OF ITS OWN BID DECLARATIONS, ITS BID SHOULD HAVE BEEN REJECTED AS NONRESPONSIVE UNDER THE NOTICE IN THE INVITATION OF TOTAL SMALL BUSINESS SET-ASIDE AND THE APPLICABLE REGULATIONS.

SINCE THE CONTRACT HAS BEEN FULLY PERFORMED, WE ARE TAKING NO ACTION WITH RESPECT THERETO OTHER THAN TO RECOMMEND THAT THE PROCUREMENT AND SBA REGULATIONS BE FOLLOWED IN THE FUTURE.